School choice with costly information acquisition

I study a model of centralized school choice in which students engage in costly search over schools before submitting preference reports to a clearinghouse. I consider three classes of preferences over schools—idiosyncratic, common, and hybrid—and characterize outcomes under two search protocols—simultaneous and sequential. With idiosyncratic preferences, there are no search externalities, and inefficiencies arise only because of uncoordinated search. Common preferences, however, generate search externalities: when high-priority students search, seats available to lower-priority students are adversely selected. Consequently, sequential search generates greater welfare than simultaneous search with idiosyncratic preferences but not necessarily with common. Additionally, with common preferences, welfare is nonmonotonic in search costs. I also show that the search protocol affects outcome inequality in important ways. For both protocols, I provide an instrument by which a designer can break students' indifferences in search strategies to coordinate search and increase welfare.